what is a short sale property for sale

Take a walk in your target neighborhood to find signs of short sale opportunities.


Follow these strategies to navigate the short-sale process and score the home you want.

Though buying a house can be stressful, the reward is great. Landing somewhere you love helps make the ups and downs of buying worth it. A short sale may have more peaks and valleys than other home-buying experiences, but with the right expectations, it may be the best buy you ever make. If you’re asking, “What is a short sale?” you’ve landed in the right place.

What is a short sale?

A short sale is when an owner is selling their home for less than the mortgage they owe on it. The lenders may agree to take a “short” on the mortgage to release it for sale.

What’s the difference between a short sale and a foreclosure?

Foreclosures and short sales may seem very similar, and they do have some basic things in common. But they have important differences, too.

A short sale happens when homeowners are struggling to make their mortgage payments. They could be on the verge of foreclosure, and selling for a lower price is the better option for them.

A foreclosure happens when a borrower is unable to make their monthly payments and the bank takes back ownership of the property. There are several stages of the foreclosure process, but if the bank completes foreclosure proceedings, the owner no longer owns the home, and the bank puts it up for sale.

  • How does a short sale happen?

    A short sale often happens after a low appraisal or a drop in property values. For example, a family purchases a home for $200,000. After 5 years, they’ve paid $40,000 of the principal amount, and therefore have $160,000 left on the mortgage. Assuming they need to sell right now, they’d have to sell at $160,000 to break even. However, if the appraisal is less than the $160,000 based on decreasing property values, then the family is short the difference between $160,000 and the appraised worth.

  • What’s needed for a short sale to go through?

    Much depends on the lender. The lender(s) must agree to accept less than what the owner owes on their mortgage, but this comes with contingencies. For example, the lender has to agree to the amount the owners set as their sale price, which makes short sales take much longer than a private sale. As a buyer, you must be willing to wait an extended period of time to see if your offer is accepted by the lender, and then, if in a time crunch, have to rush with inspections and other details before closing.

  • Can I negotiate the price of a short sale?

    Not really. Typically, the sales price of a short sale is negotiated between the seller and their lender. The buyer has little to do with the process, and in fact is more often than not accepting the price and condition of the house “as-is.”

  • What should I do while waiting for the lender to respond?

    Don’t get attached. The process is variable-heavy, so don’t mentally move in to this home. Although you may get a better deal than the market average in terms of sale price, the risk that the deal falls through is high. Keep searching for a great place to live, in case the short sale doesn’t work out.

  • Isn’t a short sale cheaper than surrounding homes?

    Yes, kind of. In the short term you might be paying less than market average (sometimes 10% less) for this home. But expect additional closing and out-of-pocket costs. Unfortunately, short sales come with a high chance of owner neglect, meaning any repairs or updates that a seller would typically pay for to allow the transaction to move forward, are now on your dime. Additionally, the seller is one step from foreclosure and therefore some seller’s closing costs will be transferred to you.

  • Who do I need to work with to purchase a short sale?

    Since it’s a tricky process, an expert can help. You’ll want to find a well-reviewed agent who’s worked with short sales before. Finding the right agent will save you a lot of stress and frustration.

    Work with a trusted inspector to get a comprehensive home inspection. Sometimes an agent will encourage you to make an offer, free of contingencies, especially in a seller’s market, and often buyers will forego the home inspection. Or, the inspection period will be shortened to speed up the closing process. In the case of a short sale, however, the home inspection is crucial. You’ll want to know what lies beneath the floorboards or in the attic before settling in for the long-haul, and take your time making that decision.

  • What else should I do before closing on a short sale?

    Save money. You may be waiting for a while to find out if you’ll even be approved to purchase the short sale. While waiting, and searching for other homes, save money for the down payment as well as any potential renovations you have in mind. Do the research and compare general prices with neighbors and friends.

Often times, buyers get caught up in how a home looks within the property lines, and forget to take a look outside and meet the people that could become their neighbors. A neighborhood you love is just as important as the high ceilings or large master bath, and could make or break your home purchase, whether it’s a private sale or short sale.

Are you exploring the option of purchasing a short sale? Discover homes for sale on Trulia.